Getting Rich Off Low-Income Housing

Oakland nearly lost 126 affordable apartments due to a nonprofit's mismanagement. But even as that nonprofit has neglected maintenance at E.C. Reems Gardens, it also has made millions of dollars for a wealthy Southern California resident.

Photo of E.C. Reems by Darwin BondGraham Photo of 108 The Strand from Zillow.com

While E.C. Reems has been in disrepair, Charles Brumbaugh has lived in luxury.

Editor's note: This story has been clarified. See below for details.

When it was originally built in 1948, E.C. Reems Gardens was a modern, middle-class apartment complex nestled in a forested valley on the north side of MacArthur Boulevard in East Oakland. But according to a city report, by the 1990s, "the then privately held property had earned a reputation in the community as a site for drug traffic and violence."

In the late 1990s, the Southern California nonprofit Corporation for Better Housing and Oakland's Center of Hope Community Church purchased E.C. Reems Gardens. The nonprofit, which owned 99 percent of the property and was responsible for managing it, used city, state, and federal housing subsidies to repair 15 of the original E.C. Reems Gardens buildings that included 126 apartments. Things were improving.

But several years ago, the same nonprofit virtually abandoned E.C. Reems' residents and stopped paying back city and federal Housing and Urban Development (HUD) loans that financed the repairs and maintained rents at affordable prices, according to interviews with city officials and public records.

According to city inspection reports, the property became plagued with raw sewage leaks, broken windows, chipping paint, and other health hazards. A large number of units became vacant, and squatters moved in. The property failed a recent HUD inspection, registering one of the lowest scores in California. Robberies and assaults increased, as did burglaries and vehicle thefts. For a time, an on-site manager reportedly walked door-to-door with a gun strapped to his hip to collect rent.

"It's like New Jack City back there," said Oakland city Councilmember Larry Reid, referring to E.C. Reems Gardens. "There were abandoned cars and raw sewage leaking into the creek. They weren't doing anything to invest in these facilities, and it was not fit for anyone to live in."

Pastor Maria Reems, daughter of Ernestine Reems, whose church was involved in the takeover of the complex in the 1990s and from whom the apartment complex got its name, said some of the buildings had mold and broken stairs, and lights were out in hallways making them dark and dangerous. "The problem is there wasn't proper management on site," she said.

"There was a hole in the ceiling, holes in the floor in my bedroom," said Betty Brown, a former tenant. "Water ran in from the ceiling. And on the stairs, I slipped and fell often."

Behind this mess is the apartment complex's owner and manager, the nonprofit Sherman Oaks-based Corporation for Better Housing (CBH). The nonprofit describes its mission as the development of low-income housing throughout the state, but government records, inspections, court documents, and interviews paint another picture of the organization and its leadership. Even as CBH has built thousands of units of affordable housing, it also has enriched one of its former executives, Charles Brumbaugh.

Although the Express uncovered no evidence that Brumbaugh is personally responsible for the conditions at E.C. Seems Gardens, he has earned millions from California's quirky system of affordable housing construction. According to state records, his privately owned, for-profit construction firm, BLH Construction, has built most of CBH's affordable rental housing projects, financed with state and federal tax credits.

While CBH isn't keeping any profits from these affordable projects, Brumbaugh's construction companies are. And the profits have been considerable.

Brumbaugh has lived a life of conspicuous consumption, purchasing expensive art, luxury cars, and multimillion-dollar homes in ritzy neighborhoods like Los Angeles' Bel Air and on The Strand in Manhattan Beach — all while affordable housing he's built and renovated is jeopardized and tenants complain of substandard conditions and large rent increases.

The problems at E.C. Reems Gardens got so bad that earlier this year, HUD threatened to foreclose on the property's already defaulted loan and auction off the buildings. Doing so would have eliminated affordability protections on all 126 units at E.C. Reems Gardens — at a time when the region is suffering from an affordable housing crisis.

The predominantly Black renter households living there could have been displaced. And the city of Oakland would have lost the $4.1 million that it had invested in the project because its loan was subordinate to HUD's. "They could sell it on the open market, and Oakland would be wiped out," said Michelle Byrd, Oakland's director of housing and community development, about a HUD foreclosure.

In June, the Oakland City Council responded with a costly solution. The council decided to spend another $4 million to purchase HUD's loan. This bailout succeeded, but now the city is scrambling to find a new manager who could buy the building from CBH and bring stability back to the neglected property.

CBH Executive Director Lori Koester didn't answer multiple phone calls and emails, and didn't return multiple voice mail messages seeking comment for this report. Brumbaugh didn't answer more than a dozen phone calls to his Los Angeles office during the past month, and his three voice mailboxes have been full and unable to record messages. He also didn't respond to several emails requesting an interview. Jake Lingo, a vice president for Integrated Community Development, another for-profit company owned by Brumbaugh that appears to be closely linked to the nonprofit CBH (they share the same phone number and office address), answered a call two weeks ago and said he would pass a message to Brumbaugh. But Brumbaugh never called back.

Oakland city officials told the Express that the Corporation for Better Housing hasn't communicated well with them either.